Correlation Between First Trust and Vident International

Can any of the company-specific risk be diversified away by investing in both First Trust and Vident International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and Vident International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Intl and Vident International Equity, you can compare the effects of market volatilities on First Trust and Vident International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of Vident International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vident International.

Diversification Opportunities for First Trust and Vident International

0.74

Correlation Coefficient

First Trust  Vident International

Poor diversification

The 3 months correlation between First and Vident is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intl and Vident International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident International and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Intl are associated (or correlated) with Vident International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident International has no effect on the direction of First Trust i.e., First Trust and Vident International go up and down completely randomly.

Pair Corralation between First Trust and Vident International

Considering the 90-day investment horizon First Trust Intl is expected to under-perform the Vident International. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Intl is 1.3 times less risky than Vident International. The etf trades about -0.02 of its potential returns per unit of risk. The Vident International Equity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,548  in Vident International Equity on September 13, 2024 and sell it today you would earn a total of  87.00  from holding Vident International Equity or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

First Trust Intl  vs.  Vident International Equity

First Trust Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Intl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, First Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vident International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Vident International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Vident International

The main advantage of trading using opposite First Trust and Vident International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vident International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vident International will offset losses from the drop in Vident International's long position.

The idea behind First Trust Intl and Vident International Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.